Demand management may be a technical term but it is fast becoming the new starting point for a swath of local authorities and public service providers wondering how to fill their looming funding gap.

Making this happen means bringing the politics back in to what has hitherto been a technocratic agenda. Local politicians need to lead demand management by changing the way they work and moving to a new mode of community leadership that is more connected, collaborative and closer to the lives of citizens.

Public services have an uneasy relationship with demand. In the private sector, demand for goods and services is seen as a near-unequivocal good, offering the potential of sustainability, new markets and growth.

For public services, demand is more complex. Officials talk about managing demand "down" – finding ways to reduce the burden on already stretched services.

Policy and economics are key drivers in the public sector and their impact can feel stark at a local level. Local authorities must, for instance, cope with rising demand for child safeguarding, homelessness, adoption or adult care services as much because of welfare reform policy or global economic fragility as the conditions at a local level.

Demand for public services also arises as a result of actions by the state itself. Misaligned or badly designed services can create what is called "failure demand". The award-winning Gov.uk website was created with this partly in mind, noting a high number of phone calls to government call centres from users who couldn't navigate previous government websites properly. The design thinking that flipped this logic to put the citizen's experience at the centre of the service is at the heart of new demand management thinking.

In a new report published this week a consortium of organisations, including the RSA, Collaborate, the Local Government Association, the ESRC and Impower, argue that by taking this to its logical conclusion will bring about a tangible shift in the way public services are designed and delivered.

We argue that there will be a £14.4bn gap between demand and supply by 2020 and that traditional efficiency or supply-side reform techniques can take us only so far. We need fundamentally to rethink the relationships between citizens, the state and public services.

In places as diverse as Calderdale, East Riding, Oldham, Wiltshire, Cheshire and Sunderland, we are seeing the emergence of a range of reforms that prioritise local demand. Some councils are using "nudge" techniques and "values mode" analysis to transform the way they communicate with residents. Others – such as Southampton – have made tangible gains in areas such as recycling and waste management. Excitingly, some are reshaping demand by building collaborative commissioning models that engage the voluntary and business sectors, which are co-designed with citizens.

What is common to all of these examples is a hopeful sense of momentum – from the "emerging science" that can help understanding of demand today, through to ways of using this insight to reshape whole systems and rethink the very role and purpose of public agencies.

This is a journey that requires trust between services, sectors and the public, which is problematic at the best of times. But, as polling by Ipsos Mori for the LGA indicates, there appears to be more chance of building this at a local level than with central government. Around 60% of those surveyed in 2013 said they "trust their local council": a level of public endorsement that will need to be backed up with tangible engagement in the future design and delivery of public services.

It is only by working together at a local level that politicians, practitioners and communities will be able to forge the strong relationships that can help public services get beyond delivery and place demand management at their core.

Dr Henry Kippin is director of Collaborate, and co-author with Anna Randle of Managing Demand: building future public services.